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Commitments and Contingencies | 12 Months Ended
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Dec. 30, 2017
Commitments And Contingencies Disclosure [Abstract] |
Commitments and Contingencies |
Note 23. | Commitments and Contingencies
Self-insurance reserves and other commitments and contingencies The company has recorded current liabilities of $30.1 million and $28.0 million related to self-insurance reserves at December 30, 2017 and December 31, 2016, respectively. The reserves include an estimate of expected settlements on pending claims, defense costs and a provision for claims incurred but not reported. These estimates are based on the company’s assessment of potential liability using an analysis of available information with respect to pending claims, historical experience and current cost trends. The amount of the company’s ultimate liability in respect of these matters may differ materially from these estimates. In the event the company ceases to utilize the independent distributor model or exits a geographic market, the company is contractually required in some situations to purchase the distribution rights from the independent distributor. The company expects to continue operating under this model and has concluded that the possibility of a loss is remote. The company’s facilities are subject to various federal, state and local laws and regulations regarding the discharge of material into the environment and the protection of the environment in other ways. The company is not a party to any material proceedings arising under these regulations. The company believes that compliance with existing environmental laws and regulations will not materially affect the consolidated financial condition, results of operations, cash flows or the competitive position of the company. The company believes it is currently in substantial compliance with all material environmental regulations affecting the company and its properties. On August 9, 2016, the U.S. Department of Labor (the “DOL”) notified the company that it was scheduled for a compliance review under the Fair Labor Standards Act (“FLSA”). The company is cooperating with the DOL. Litigation The company and its subsidiaries from time to time are parties to, or targets of, lawsuits, claims, investigations and proceedings, including personal injury, commercial, contract, environmental, antitrust, product liability, health and safety and employment matters, which are being handled and defended in the ordinary course of business. While the company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that it is remote that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations or cash flows in the future. However, adverse developments could negatively impact earnings in a particular future fiscal period. At this time, the company is defending 33 complaints filed by distributors alleging that such distributors were misclassified as independent contractors. Twenty-two of these lawsuits seek class and/or collective action treatment. The remaining 11 cases allege individual claims and do not seek class or collective action treatment. The respective courts have ruled on plaintiffs’ motions for class certification in 16 of the pending cases, each of which is discussed below. Unless otherwise noted, a class was conditionally certified under the FLSA in each of the cases described below, although the company has the ability to petition the court to decertify that class at a later date:
Case Name |  | Case No. |  | Venue |  | Date Filed |  | Status
Martinez et al. v. Flowers Foods, Inc., Flowers Bakeries Brands, Inc., Flowers Baking Co. of California, LLC, and Flowers Baking Co. of Henderson, LLC |  | 2:15-cv-05112 16-56327 |  | U.S. District Court Central District of California U.S. Court of Appeals for the Ninth Circuit |  | 7/7/2015 |  | The court denied a motion to certify Plaintiffs’ California state law claims against Defendants as a class action. This lawsuit was settled on confidential terms on June 29, 2016, and thereafter dismissed with prejudice. The denial of the class certification is currently on appeal to the U.S. Court of Appeals for the Ninth Circuit
Rosinbaum et al. v. Flowers Foods, Inc. and Franklin Baking Co., LLC |  | 7:16-cv-00233 |  | U.S. District Court Eastern District of North Carolina |  | 12/1/2015 |  |
Coyle v. Flowers Foods, Inc. and Holsum Bakery, Inc. |  | 2:15-cv-01372 |  | U.S. District Court District of Arizona |  | 7/20/2015 |  | On October 4, 2017, the parties filed with the court a Motion for Preliminary Approval of Class Action Settlement informing the court that the parties reached an agreement to settle this matter for a payment of $4.3 million, comprised of $1.2 million in settlement funds, $2.9 million in attorneys’ fees, and $0.2 million as an incentive for class members who are active distributors not to opt out of certain portions of the new distributor agreement. This settlement charge has been recorded as a selling, distribution and administrative expense in our Consolidated Statements of Income during the third quarter of fiscal 2017. The parties are working to obtain final court approval of the settlement.
McCurley v. Flowers Foods, Inc. and Derst Baking Co., LLC |  | 5:16-cv-00194 |  | U.S. District Court District of South Carolina |  | 1/20/2016 |  | On December 7, 2017, the parties reached an agreement in principal to settle this matter for a payment of $1.5 million, comprised of $0.8 million in settlement funds, $0.6 million in attorneys’ fees, and a collective $0.1 million for a service award and as an incentive for class members who are active distributors not to opt out of certain portions of the new distributor agreement. This settlement charge has been recorded as a selling, distribution and administrative expense in our Consolidated Statements of Income during the fourth quarter of fiscal 2017. The parties are working to obtain court approval of the settlement.
Neff et al. v. Flowers Foods, Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC |  | 5:15-cv-00254 |  | U.S. District Court District of Vermont |  | 12/2/2015 |  |
Noll v. Flowers Foods, Inc., Lepage Bakeries Park Street, LLC, and CK Sales Co., LLC |  | 1:15-cv-00493 |  | U.S. District Court District of Maine |  | 12/3/2015 |  |
Zapata et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Houston, LLC |  | 4:16-cv-00676 |  | U.S. District Court Southern District of Texas |  | 3/14/2016 |  |
Rodriguez et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Houston, LLC |  | 4:16-cv-00245 |  | U.S. District Court Southern District of Texas |  | 1/28/2016 |  |
Richard et al. v. Flowers Foods, Inc., Flowers Baking Co. of Lafayette, LLC, Flowers Baking Co. of Baton Rouge, LLC, Flowers Baking Co. of Tyler, LLC and Flowers Baking Co. of New Orleans, LLC |  | 6:15-cv-02557 |  | U.S. District Court Western District of Louisiana |  | 10/21/2015 |  |
Carr et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Oxford, Inc. |  | 2:15-cv-06391 |  | U.S. District Court Eastern District of Pennsylvania |  | 12/1/2015 |  |
Boulange v. Flowers Foods, Inc. and Flowers Baking Co. of Oxford, Inc. |  | 2:16-cv-02581 |  | U.S. District Court Eastern District of Pennsylvania |  | 3/25/2016 |  | This matter has been consolidated with the Carr litigation described immediately above.
Soares et al. v. Flowers Foods, Inc., Flowers Bakeries Brands, Inc., Flowers Baking Co. of California, LLC, and Flowers Baking Co. of Modesto, LLC |  | 3:15-cv-04918 |  | U.S. District Court Northern District of California |  | 10/26/2015 |  | On June 28, 2017, the court denied Plaintiffs' motion to certify California state law claims against Defendants as a class action.
Medrano v. Flowers Foods, Inc. and Flowers Baking Co. of El Paso, LLC |  | 1:16-cv-00350 |  | U.S. District Court District of New Mexico |  | 4/27/2016 |  |
Schucker et al. v. Flowers Foods, Inc., Lepage Bakeries Park St., LLC, and C.K. Sales Co., LLC |  | 1:16-cv-03439 |  | U.S. District Court Southern District of New York |  | 5/9/2016 |  | The court denied Plaintiffs' motion for conditional certification of a class under the FLSA. On February 14, 2018, the parties reached an agreement in principal to settle this matter for a payment of approximately $1.3 million, comprised of $0.4 million in settlement funds, $0.9 million in attorneys’ fees, and a collective $0.1 million for service awards and incentives for class members who are active distributors not to opt out of certain portions of the new distributor agreement. The parties are working to obtain court approval of the settlement.
Long v. Flowers Foods, Inc., Flowers Baking Co. of Morristown, LLC, and Flowers Baking Co. of Knoxville, LLC |  | 3:17-cv-00724 |  | U.S. District Court Middle District of Tennessee |  | 4/20/2017 |  |
Wiatrek v. Flowers Foods, Inc. and Flowers Baking Co. of San Antonio, LLC |  | 5:17-cv-00772 |  | U.S. District Court Western District of Texas |  | 8/15/2017 |  |
The company and/or its respective subsidiaries contests the allegations and are vigorously defending all of these lawsuits. Given the stage of the complaints and the claims and issues presented, except for lawsuits disclosed herein that have reached a settlement or agreement in principle, the company cannot reasonably estimate at this time the possible loss or range of loss that may arise from the unresolved lawsuits. As of December 30, 2017, the company has settled, and the appropriate court has approved, the following collective and/or class action lawsuits filed by distributors alleging that such distributors were misclassified as independent contractors. In each of these settlements, in addition to the monetary terms noted below, the settlements also included certain non-economic terms intended to strengthen and enhance the independent contractor model:
Case Name |  | Case No. |  | Venue |  | Date Filed |  | Comments
Rehberg et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Jamestown, LLC |  | 3:12-cv-00596 |  | U.S. District Court Western District of North Carolina |  | 9/12/2012 |  | On June 30, 2017, the Court dismissed this lawsuit and approved an agreement to settle this matter for $9.0 million, comprised of $5.2 million in settlement funds and $3.8 million in attorneys’ fees. The settlement class consisted of approximately 270 class members. This settlement was recorded as a selling, distribution and administrative expense in our Consolidated Statements of Income during the fourth quarter of fiscal 2016 and was paid in fiscal 2017.
Bokanoski et al. v. Lepage Bakeries Park Street, LLC and CK Sales Co., LLC |  | 3:15-cv-00021 |  | U.S. District Court District of Connecticut |  | 1/6/2015 |  | On March 13, 2017, the Court dismissed this lawsuit and approved an agreement to settle this matter, which includes 49 territories, for $1.25 million, including attorneys' fees. This settlement was recorded in selling, distribution and administrative expenses in our Consolidated Statements of Income during the third quarter of our fiscal 2016 and was paid during the first quarter of fiscal 2017.
Stewart et al. v. Flowers Foods, Inc. and Flowers Baking Co. of Batesville, LLC |  | 1:15-cv-01162 |  | U.S. District Court Western District of Tennessee |  | 7/2/2015 |  | On April 10, 2017, the Court dismissed this lawsuit and approved an agreement to settle this matter for $250,000, including attorneys’ fees, on behalf of sixteen distributors. This settlement was recorded in selling, distribution and administrative expenses in our Consolidated Statements of Income and was paid during the first quarter of fiscal 2017.
On August 12, 2016, a class action complaint was filed in the U.S. District Court for the Southern District of New York by Chris B. Hendley (the “Hendley complaint”) against the company and certain senior members of management (collectively, the “defendants”). On August 17, 2016, another class action complaint was filed in the U.S. District Court for the Southern District of New York by Scott Dovell, II (the “Dovell complaint” and together with the Hendley complaint, the “complaints”) against the defendants. Plaintiffs in the complaints are securities holders that acquired company securities between February 7, 2013 and August 10, 2016. The complaints generally allege that the defendants made materially false and/or misleading statements and/or failed to disclose that (1) the company’s labor practices were not in compliance with applicable federal laws and regulations; (2) such non-compliance exposed the company to legal liability and/or negative regulatory action; and (3) as a result, the defendants’ statements about the company’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis. The counts of the complaints are asserted against the defendants pursuant to Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 under the Exchange Act. The complaints seek (1) class certification under the Federal Rules of Civil Procedure, (2) compensatory damages in favor of the plaintiffs and all other class members against the defendants, jointly and severally, for all damages sustained as a result of wrongdoing, in an amount to be proven at trial, including interest, and (3) awarding plaintiffs and the class their reasonable costs and expenses incurred in the actions, including counsel and expert fees. On October 21, 2016, the U.S. District Court for the Southern District of New York consolidated the complaints into one action captioned “In re Flowers Foods, Inc. Securities Litigation” (the “consolidated action”), appointed Walter Matthews as lead plaintiff (“lead plaintiff”), and appointed Glancy Prongay & Murray LLP and Johnson & Weaver, LLP as co-lead counsel for the putative class. On November 21, 2016, the court granted defendants’ and lead plaintiff’s joint motion to transfer the consolidated action to the U.S. District Court for the Middle District of Georgia. Lead plaintiff filed his Consolidated Class Action Complaint on January 12, 2017, raising the same counts and general allegations and seeking the same relief as the Dovell and Hendley complaints. On March 13, 2017, the company filed a motion to dismiss the lawsuit which remains pending before the court at this time. The company and/or its respective subsidiaries are vigorously defending these lawsuits. Given the stage of the complaints and the claims and issues presented, the company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the unresolved lawsuits. See Note 14, Debt, Lease and Other Commitments, for additional information on the company’s commitments.

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